The inflow of workers’ into Pakistan continued its upward trajectory in February 2025, contributing to the country’s foreign exchange reserves and economic stability. The latest data released by the State Bank of Pakistan indicates a substantial year-on-year growth in remittances, both for the month of February and the cumulative period of 8MFY25.
The country received $3.12 billion in remittances during February 2025, registering a year-on-year growth of 32.55 percent. A breakdown of the remittances by major source countries for February 2025 shows that Saudi Arabia’s contribution increased by 34.6 percent year-on-year. Remittances from the UAE grew by 55.7 percent year-on-year, and inflows from the UK and the USA increased by 32.24 and 11.9 percent year-on-year. EU and the GCC regions also depicted the growth of 25.6 and 21.4 percent respectively. Additionally, Australia, Canada, South Africa, and Malaysia also showed notable increases in remittance inflows. The robust performance in February can be attributed to seasonal factors, improved formal banking channels, the upcoming month of Ramzan in March, and policies encouraging remittances through official means.
During the first eight months of FY25, remittance inflows surged to $24.0 billion, reflecting a strong 32.55 percent year-on-year growth compared to $18.1 billion in 8MFY24. This marks the highest-ever remittance inflows for the corresponding period in Pakistan’s history. The key contributors to this increase include higher inflows from Saudi Arabia, UAE, and the UK, which alone contributed over $12 billion to the total inflows. Policy interventions by the government and SBP, such as incentives for remittances via banking channels and crackdowns on illegal money transfers, have encouraged overseas Pakistanis to use formal channels. Additionally, a stable exchange rate and reduced premiums in the informal market have discouraged the use of informal channels.
The remittance inflows have shown consistent growth throughout FY25, with a notable peak in February. Historically, remittances tend to increase in the months leading up to Ramadan and Eid due to higher financial support sent home by expatriates. Looking ahead, the government expects remittance inflows to remain strong, particularly with upcoming religious and seasonal spending patterns. Moreover, if the economic stability in key host countries, such as Saudi Arabia, the UAE, and the UK, remains intact, inflows are likely to maintain an upward trend.
The sharp increase in workers’ remittances in February 2025 and 8MFY25 is a positive development for Pakistan’s economy. It provides a much-needed cushion to foreign exchange reserves and helps manage the balance of payments.
Digital currency is an unexplored area that has the potential to revolutionize remittances in Pakistan by making transactions faster, cheaper, and more accessible, especially for the unbanked population. Blockchain-based transfers reduce costs, enhance transparency, and attract funds into formal channels, countering reliance on informal methods like Hundi. However, Pakistan currently restricts cryptocurrency use, with the State Bank banning trading and transactions in private digital currencies. Despite this, the newly established Pakistan Crypto Council (PCC), led by the Finance Minister’s Chief Adviser Bilal bin Saqib, is advocating for a clear regulatory framework to facilitate blockchain and Web3 innovations. Key initiatives under consideration include tokenizing real-world assets and establishing regulatory sandboxes, all while ensuring compliance with Financial Action Task Force (FATF) standards. If implemented effectively, blockchain could streamline remittances, increase financial inclusion, and strengthen Pakistan’s foreign reserves.
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